Utterson Inc. (Utterson) is a small manufacturing company in northern Ontario. Utterson’s owner has approached you to take an equity position in the company. The owner has provided the balance sheets for the last two years. In addition, you have learned that net income in 2014 was \($135,000\), interest expense was \($28,000\), \($15,000\) in dividends was paid on the preferred shares, and

\($100,000\) was paid on the common shares. Utterson’s tax rate is 15.5 percent. The estimated market value of Utterson’s shares on December 31, 2014 was \($26\) per share, the weighted-average number of shares outstanding during 2014 was 50,000, and there were 55,000 shares outstanding on December 31, 2014.

Required:
Calculate the following ratios for 2014: current ratio, debt-to-equity ratio, return on assets, return on equity, basic earnings per share, and price-to-book ratio.

Transcribed Image Text:

Utterson Inc. Balance sheets as of December 31, 2014 2013 2014 2013 Liabilities and Assets shareholders' Equity Current assets $210,000 $202,500 Current liabilities $168,750 $164,250 Non-current assets 575,000 540,000 Long-term debt 248,750 285,750 Preferred shares 56,250 56,250 Common shares 155,500 103,500 Accumulated other comprehensive income 12,000 9,000 Retained earnings 143,750 123,750 Total liabilities and Total assets $785,000 $742,500 shareholders' equity $785,000 $742,500